Black liquor tax credit gets attention in the US
In laws adopted in 2005 and 2007 US law makers introduced a tax credit for bio-based liquid fuels mixed into diesel oil. When doing this they didn’t think about the existing and extensive use of black liquor, in essence liquid biomass from the kraft pulping process, as fuel in the pulp and paper industry. So the wording of the legislation also made it possible to claim the tax credit by adding some small amount of diesel oil into the black liquor fired at pulp mills. For many pulp producers this has led to very substantial extra income. For International Paper, the largest US pulp and paper company, the extra income could exceed a billion dollars for 2009.
Even if this tax break may be short-lived - the US administration is now trying to eliminate it by October 1 - this story not only highlights how difficult it is to write legislation without unforeseen consequences – it also points to the issue of equitable treatment when using tax breaks, free issue certificates systems and similar incentives to encourage change.
How to get an equitable, durable incentives system?
Is it fair to give those who currently behaves in a undesired way (the smoker or the fossil fuel user) a tax break if he quits while those who already behaves in the desired way (the non-smoker or the pulp mill using biofuels) will have to finance the tax break for the culprits? This is certainly an issue that needs to be taken into consideration by legislators globally to get a durable, long-term framework for renewable energy use.